Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- 10. Finding the interest rate and the number of years The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations. If a security of $4,000 will be worth $5,324.00 three years in the future, assuming that no additional deposits or withdrawals are made, what is the implied interest rate the investor will earn on the security? ○ 6.00% ○ 7.50% ○ 10.00% ○ 12.00% If an investment of $35,000 is earning an interest rate of 11.00% compounded annually, it will take value of $58,977.04-assuming that no additional deposits or withdrawals are made during this time. for this investment to grow to a Which of the following statements is true, assuming that no additional deposits or withdrawals are made? If you invest $1 today at 15% annual compound interest for 82.3753 years, you'll end up with approximately $100,000. ○ If you invest $5 today at 15% annual compound interest for 82.3753 years,…arrow_forwardIf $43,000 is invested now, which of the following value is closest to the equivalent future dollars 6 years from now to earn a real interest rate of 3% per year when the inflation rate is 6% per year? Select one: а. 51,344 b. 72,833 c. 66,709 d. 79,519 е. 60,996arrow_forward5. Suppose you have a 2.5-year remaining on an interest rate swap with a notional principal of $10,000, 000 between Company A and Company B. Company A pays fixed rate and Company B pays the float rate. Fixed and float payments are exchanged every year and the last payment was exchanged 6 months ago. The fixed rate is 3.5% per annum, and the floating rate is tied to the annual LIBOR. The previous 1-year LIBOR rate, set 6 months ago, is 2.75%, 6 month LIBOR is 3.25%. the 1.5-year LIBOR is 3.25%, and the 2.5-year LIBOR is 3.50%. Calculate the present value of the fixed and floating legs of the swap, and determine the swap's net present value from Company A's perspective. Assume annual compounding for discounting.arrow_forward
- (mark-to-market) You enter a long position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are iS = 3.9% and i€ = 3.9%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.43/€ the next day and interest rates remain the same, your profit or loss for this day is S _. (Keep the sign and two decimal places.)arrow_forwardSuppose the two-year interest rate is r2 with quarterly-compounding and 30/360 daycount. Suppose the price today of a ZCB maturing in 4 years is Z(0,4). Give a formula for the two-year forward two-year libor rate L0[2,4] in terms of r2 and Z(0,4).arrow_forwardA commercial bill with a face value of P50 000 has a current price of P49291. This bill is trading at a yield of 7.5% which necessarily implies a time to maturity of how many days?arrow_forward
- (mark-to-market) You enter a long position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i$=2.6% and iç-5.5%. The current spot rate is $1.38/€. Assume 360 days a year. If the spot rate is $1.36/€ the next day and interest rates remain the same, your profit or loss for this day is $_ ____.(Keep the sign and two decimal places.)arrow_forwardSuppose that oil forward prices for 1 year, 2 years, and 3 years are $62, $74, and $80 per barrel. The 1-year effective annual interest rate is 3.4%, the 2-year interest rate is 3.0%, and the 3-year interest rate is 2.6%. What is the fixed per-barrel price in a 3-year swap that calls for delivery of 4 barrels of oil at the end of the first year, 2 barrels the second year, and 2 barrels the third year?arrow_forwardWhat is the current value of a security that pays P165,500 per year for 10 years if similar investments now earn 10%. a. P1,016,931.30 b. P1,116,931.30 c. P1,006,931.30 d. P1,216,931.30arrow_forward
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